Enron and Worldcom Scandals
Enron and WorldCom Scandals
Matthew Morrison
ACC/260
8/18/12
Enron and WorldCom Scandals Question number one of the Enron case focuses on the corporations that got Enron into its difficulties these were the special purpose entities for joint partnerships including Chewco, LJM1, LMJ2 and the Raptors. Number three of the Enron case shows us that the board was divided into five divisions, all of which were full of well-educated financial employees who understood how and were involved in the complex structure of how the profits were being made. Number five of the Enron case shows how Ken Lay was missing guidance from company policies and compliance. It also reveals that the internal audits were missing in some occasion and the communication with Arthur Andersen was missing guidance. He let everything happen and did not go to a different audit firm or accounting firm. Number six of the Enron case focuses on the important information that was kept from the board, and the internal policies that were not followed. Number nine of the Enron case reveals conflicts of interest in the SPEs by letting Fastow form them and state the money on the income statement of Enron. It also reveals conflicts of interest in Arthur Andersen’s activities by letting him do the bookkeeping as well as their audits, internal and external. It also reveals the executives conflicts of interest by developing several companies for the sake of keeping the main one afloat. Question number one in the WorldCom case reveals that they used cookie jar accounting to create excess reserves to inflate future time periods profits. Number three in the WorldCom case informs us that the board of director should have went over the third and fourth quarter of 2000 books which were improperly decreased, causing pre-tax earnings to be overstated by 828 million dollars. Number four of the WorldCom case reveals how Bernie Ebbers was the CEO yet steps were taken to protect
Matthew Morrison
ACC/260
8/18/12
Enron and WorldCom Scandals Question number one of the Enron case focuses on the corporations that got Enron into its difficulties these were the special purpose entities for joint partnerships including Chewco, LJM1, LMJ2 and the Raptors. Number three of the Enron case shows us that the board was divided into five divisions, all of which were full of well-educated financial employees who understood how and were involved in the complex structure of how the profits were being made. Number five of the Enron case shows how Ken Lay was missing guidance from company policies and compliance. It also reveals that the internal audits were missing in some occasion and the communication with Arthur Andersen was missing guidance. He let everything happen and did not go to a different audit firm or accounting firm. Number six of the Enron case focuses on the important information that was kept from the board, and the internal policies that were not followed. Number nine of the Enron case reveals conflicts of interest in the SPEs by letting Fastow form them and state the money on the income statement of Enron. It also reveals conflicts of interest in Arthur Andersen’s activities by letting him do the bookkeeping as well as their audits, internal and external. It also reveals the executives conflicts of interest by developing several companies for the sake of keeping the main one afloat. Question number one in the WorldCom case reveals that they used cookie jar accounting to create excess reserves to inflate future time periods profits. Number three in the WorldCom case informs us that the board of director should have went over the third and fourth quarter of 2000 books which were improperly decreased, causing pre-tax earnings to be overstated by 828 million dollars. Number four of the WorldCom case reveals how Bernie Ebbers was the CEO yet steps were taken to protect
References: Business & Professional Ethics for Directors, Executives, & Accountants, 4e, Brooks - © 2007 Thomson South-Western